Car buyers looking to improve their credit need to pay attention to their finances. Buying a car isn’t cheap, but saving for a low down payment can help you get approved so you can improve your credit over time.
How Much Money Down Will I Need?
The national average for a car down payment is around 12 percent. Most down payments fall within 10 to 20 percent of the vehicle’s selling price, and they aren’t always required. However, when you’re dealing with subprime credit, you’ll nearly always have a down payment requirement. With a bad credit auto loan, lenders typically require a buyer to have a down payment of $1,000 or 10 percent of the car's selling price, whichever is less.
Even if you have good credit, it’s still highly recommended you make a down payment, especially if you plan to buy a new vehicle. The higher the down payment, the lower the monthly payments will be. Because new cars depreciate around 20 percent in value during the first year, a down payment can lower the time you’re upside down in the loan. If you aren’t comfortable putting a full 20 percent down, any amount over 10 percent will work – unless the lender states otherwise.
What to Do When You Have Your Down Payment
Once you have your down payment, there are three steps that you should take to prepare for a car loan:
Request your credit reports – You’re entitled to a free copy of your credit reports once every 12 months from each of the three national credit bureaus. Look them over and double check for any errors. If you see errors, contact the bureau to dispute it and have it fixed.
Rate shop – Getting zero percent financing isn’t an option unless you have an excellent credit score. Don’t settle for one lender with a decent offer, rate shop and see what multiple lenders are willing to offer to find the best deal.
Research vehicles – The last thing to decide is the type of vehicle you’ll need. Research vehicle models, types, and years through sites such as CarsDirect and The Car Connection. Keep your budget in mind to see which vehicles will be the best fit for your financial situation.
If you know you won’t be able to afford a high down payment, we’ve got five low down payment cars for you to check out. On average, a 10 percent down payment on these vehicles is less than $750. Here they are along with the average down payment:
- 2008 Nissan Quest - $629.40
- 2008 Volkswagen Jetta Sedan - $635.10
- 2010 Volkswagen New Beetle Coupe - $637.40
- 2009 Honda Fit - $643.30
- 2008 Volkswagen Passat Sedan - $643.30
These are only the top five vehicles in terms of the lowest down payment – there are plenty of other used vehicles that have similar affordable down payments.
Down Payments Help Car Buyers
Any amount toward a down payment is sure to only help you in the long run. Depending on your situation, a down payment may be unavoidable, so it’s extremely important to plan accordingly before looking for a lender. If you’re having trouble finding financing and don’t know where to turn, let Drivers Lane help.
We work with a nationwide network of special finance dealers that have lending resources to work with people who find themselves in unique credit situations. Take the first step toward finding a dealer to meet your needs. Just fill out our simple auto loan request form to get started today.